Medicare comes in four main types, and which one you choose affects your costs, your doctors, and how you pay for prescriptions

Medicare is federal health insurance for people 65 and older, some younger people with disabilities, and people with end-stage renal disease. The program splits into four distinct plans — Original Medicare (Parts A and B), Medicare Advantage (Part C), Medigap, and Medicare Part D — and each one works differently. You do not have to pick all four; the combination you choose depends on what coverage you want and how much you are willing to spend out of pocket.

The confusion happens because Medicare is not one plan. It is a framework, and you build your coverage by choosing which pieces to use. Some people stick with Original Medicare and add a Medigap policy to cover what Medicare does not. Others switch to Medicare Advantage, which is an all-in-one alternative run by private insurance companies. Most people add Part D separately for prescription drug coverage no matter which main plan they choose. Understanding what each type covers — and what it does not — is the first step to knowing what your actual costs will be.

Key Takeaways

  • Original Medicare (Parts A and B) is run by the federal government and covers hospital stays, doctor visits, and some preventive care, but leaves you responsible for deductibles and coinsurance.
  • Medicare Advantage (Part C) is sold by private insurance companies and bundles hospital, doctor, and often prescription coverage into one plan, usually with lower premiums but narrower doctor networks.
  • Medigap is supplemental insurance sold by private companies that pays some of the costs Original Medicare does not cover, such as deductibles and coinsurance.
  • Medicare Part D is prescription drug coverage sold by private insurers and must be added separately; skipping it when you first become may be able to access can result in a permanent penalty.
  • You can only switch plans during specific enrollment windows, usually in the fall, so understanding your options before that window opens matters.

Original Medicare: Parts A and B, and what they actually cover

Original Medicare is the default plan run directly by the federal government. Part A covers inpatient hospital stays, skilled nursing facility care after a hospital stay, hospice care, and some home health services. Part B covers doctor visits, outpatient care, medical equipment, and preventive services like screenings and vaccines. Both parts have deductibles and coinsurance — meaning you pay a set amount before Medicare starts paying, and then you split the cost with Medicare for many services.

The catch with Original Medicare is that it does not have an out-of-pocket maximum. If you need expensive care, you could end up paying thousands of dollars in deductibles and coinsurance with no ceiling on what you owe. That is why many people who choose Original Medicare also buy a Medigap policy to cover those gaps. Original Medicare also does not include prescription drug coverage, so you must add Part D separately if you want it.

With Original Medicare, you can see any doctor or hospital in the country that accepts Medicare — there is no network restriction. This flexibility appeals to people who travel, have established relationships with specific doctors, or live in rural areas where Medicare Advantage plans may not operate.

Medicare Advantage: The all-in-one alternative with trade-offs

Medicare Advantage (Part C) is an alternative to Original Medicare sold by private insurance companies like UnitedHealthcare, Humana, and Anthem. Instead of using Original Medicare, you enroll in a Medicare Advantage plan, and that private company becomes responsible for covering your hospital, doctor, and usually prescription drug benefits. The federal government pays the insurance company a fixed amount per month to cover you, and the company keeps whatever it does not spend.

Medicare Advantage plans often have lower premiums than Original Medicare plus Medigap, and they usually include prescription drug coverage built in. Many plans also cover services Original Medicare does not, such as dental, vision, or hearing aids. The trade-off is that you must use doctors and hospitals within the plan's network, and you typically need a referral from your primary care doctor to see a specialist. If you go out of network, you pay more or the plan may not cover it at all.

Medicare Advantage plans also have an out-of-pocket maximum — a yearly cap on what you pay for covered services. Once you hit that limit, the plan pays for everything else for the rest of the year. This protection does not exist in Original Medicare, which is why it appeals to people who expect significant medical expenses.

Medigap: Supplemental coverage that fills the gaps in Original Medicare

Medigap (also called Supplement Insurance) is sold by private insurance companies and works only with Original Medicare. It pays some or all of the costs that Original Medicare leaves you responsible for — deductibles, coinsurance, and copayments. Medigap does not cover prescription drugs, dental, vision, hearing, or long-term care.

Medigap plans are labeled with letters (Plan A, Plan B, Plan C, Plan D, and so on), and each letter represents a different combination of coverage. Plan A is the most basic and cheapest. Plan G covers more and costs more. The specific benefits of each letter are standardized by federal law, so a Plan G from one insurance company covers the same things as a Plan G from another company — only the premium differs.

You can only enroll in Medigap during your initial enrollment period, which is the six months after you turn 65 and enroll in Medicare Part B. If you miss that window, you may not be able to enroll later, or you may face higher premiums. You cannot have both Medigap and Medicare Advantage at the same time.

Medicare Part D: Prescription drug coverage you add separately

Part D is prescription drug coverage sold by private insurance companies. If you have Original Medicare, you must add Part D separately. If you have Medicare Advantage, prescription coverage is usually included, though you can sometimes switch to a standalone Part D plan if the Advantage plan's drug formulary does not work for you.

Part D plans vary widely in which drugs they cover, how much you pay, and which pharmacies you can use. Each plan has a formulary — a list of covered drugs — and drugs are placed in tiers that determine your cost. A generic drug on Tier 1 might cost $5, while a brand-name drug on Tier 3 might cost $50 or more. Plans also have a deductible, and once you spend a certain amount out of pocket, you enter the "donut hole," where you pay a higher percentage of drug costs until you reach catastrophic coverage.

If you do not enroll in Part D when you first become may be able to access, you pay a permanent penalty for every month you go without coverage — even if you enroll later. The penalty is roughly 1 percent of the national average Part D premium per month of delay. If you delay for two years, you owe an extra 24 percent on top of your premium for life.

How to choose between these plans

Start by asking yourself what matters most: low premiums, flexibility in choosing doctors, or predictable out-of-pocket costs. If you want to see any doctor and do not mind higher out-of-pocket costs, Original Medicare plus Medigap and Part D might work. If you want lower premiums and do not mind a network, Medicare Advantage might be better. If you are healthy and rarely see doctors, a lower-premium Medicare Advantage plan might save you money overall.

Next, look at your specific situation: Which doctors do you see regularly, and are they in the Medicare Advantage network? What prescriptions do you take, and are they covered under the Part D plans available to you? Do you travel frequently, or do you stay in one area? How much can you afford to pay out of pocket in a given year?

You can compare plans using the Medicare Plan Finder tool on Medicare.gov, which shows you plans available in your area, their premiums, deductibles, and which doctors and pharmacies are in network. You can also call 1-800-MEDICARE to speak with someone who can walk you through your options.

When you can change your plan

You cannot switch Medicare plans whenever you want. Most people can only change during the Annual Enrollment Period, which runs from October 15 to December 7 each year. Changes made during this window take effect on January 1. If you miss this window, you are locked into your current plan for the rest of the year.

There are exceptions. If you move to a new state, lose employer coverage, or experience certain life events, you may may have access to for a Special Enrollment Period that lets you change plans outside the normal window. If you enroll in Medicare for the first time, you have an Initial Enrollment Period of seven months centered on your 65th birthday.

Frequently Asked Questions

Can I have both Original Medicare and Medicare Advantage at the same time?

No. You must choose one or the other. If you enroll in Medicare Advantage, you are automatically disenrolled from Original Medicare Part B. If you later switch back to Original Medicare, you may face a waiting period before Medigap coverage begins.

Do I have to enroll in Part D if I do not take any prescription medications?

If you have Original Medicare, you are not required to enroll in Part D, but skipping it carries a permanent penalty if you enroll later. If you have Medicare Advantage with drug coverage included, you are already covered for prescriptions even if you do not use them now.

What happens if I do not enroll in Medicare when I turn 65?

If you delay enrolling without a valid reason, you pay a permanent penalty on your Part B and Part D premiums for as long as you have Medicare. The penalty is roughly 10 percent per year of delay for Part B and 1 percent per month for Part D. If you are still working and have employer coverage, you may be able to delay without penalty.

Can I switch from Medicare Advantage back to Original Medicare?

Yes, but only during the Annual Enrollment Period or if you may have access to for a Special Enrollment Period. If you switch back to Original Medicare, you can enroll in Medigap, but you may face higher premiums or waiting periods depending on how long you were in Medicare Advantage.

How do I know which Part D plan covers my medications?

Use the Medicare Plan Finder tool on Medicare.gov and enter your medications. The tool shows you which plans cover each drug, what tier it is on, and what you will pay. You can also call your pharmacy and ask which Part D plans they work with.